The counterfeit and diversion of products and services is a global problem. One of the leading types of counterfeit products is pharmaceutical drugs that are falsely-labeled, have expired, have active ingredients that are diluted, adulterated, substituted, completely misrepresented, or is sold under a false brand name. A person who uses a counterfeit drug may experience a number of dangerous consequences, including death.
Many counterfeit drugs came from countries that make legal drugs. In one country, for example, it is illegal to sell counterfeit drugs for domestic use, but not illegal to manufacture and export them. As a result, it is estimated that 75% of counterfeit drugs come from this country. At the same time, this country also is a leading supplier of high quality drugs sold by legitimate drug manufacturers, including most leading brand name drugs sold in the US and Europe.
The full extent of the problem is unknown. It is estimated that as much as 10% of drugs sold worldwide are counterfeit, and in some countries, this number may exceed 50%. In 2003, the World Health Organization estimated that the annual cost of counterfeit drugs exceeded US$32 billion.
There are several technologies that attempt to combat these problems. One is based on RFID tags and requires special equipment. Another is called ePedigree and is being promoted by the U.S. Food and Drug Administration. ePedigree tracks drugs from manufacturers to pharmacies and is designed to prevent the counterfeiting or diversion of drugs by allowing wholesalers and pharmacists to determine the identity and dosage of individual products. The 2006 Compliance Policy Guide for the Prescription Drug Marketing Act stated that “a drug pedigree is a statement of origin that identifies each prior sale, purchase, or trade of a drug, including the date of those transactions and the names and addresses of all parties to them.”
As of 2008, most U.S. states had some sort of ePedigree requirement. However, these are little more than requiring pharmaceutical supply chain companies to provide audit reports. ePedigree laws continue to change rapidly and some states are pushing out deadlines by many years.
While ePedigree looks promising, it has many serious flaws as illustrated by its implementation by a major U.S. software provider:                ePedigree systems require an industrial-strength supply chain infrastructure. Deployment requires things like SAP-based ERP systems requiring millions of dollars and years of deployment. ePedigree is an expensive sledge hammer to crack millions of little peanuts.        ePedigree focuses on pallets and packages and not on bottles or even individual pills in bottles.        ePedigree does not police bad actors in the entire supply chain. For example, any retailer can still substitute counterfeit products if it makes economic sense.        ePedigree requires special equipment like barcode and RFID readers to read serial numbers.        Software providers are waiting to deploy RFID technology because the costs for secure tags remain too high for wide adoption.        Another ePedigree flaw may be the numbering scheme—in spite of the huge infrastructure costs, France is already running out of serial numbers.        ePedigree does nothing to protect the information systems that protect the products and services. This invites bad actors to circumvent ePedigree by breaking into tracking systems in order to manipulate the information related to manufacturers, distributers, retailers, doctors, and patients.        ePedigree does not have baked-in controls and incentives. For example, it does not permit a consumer to rate the integrity a retailer, which would put huge pressure on the retailer to sell legitimate products. There is also no tie-in with law-enforcement when things go obviously wrong.        Finally, ePedigree is only tuned for pharmaceutical drug products.        
As a result, many firms are opposed to ePedigree. One called deployment costs “overwhelming” and has put the entire project on hold. In fact, the deadline to meet California's requirements may be delayed back to 2015 due to pressure from the pharmaceutical industry. ePedigree is an expensive, complex extension to current supply-chain systems for large corporations. It offers virtually nothing for counterfeit or diversion problems outside North America, nor the problems facing the vast majority of businesses in the global marketplace.
As a result, there is a need for a simpler, less expensive way to combat counterfeit and diversion problems for all products and services.